Money: A Mentality
As Jacob Goldstein illustrates in his article “Money, The True Story of a Made Up Thing”, money is an abstract concept. When we first began our discussion of stone money in class, I was unaware of what this meant. However, after listening to the NPR broadcast, it became more clear to me that humans are what give money its value. In his article, Goldstein states, “it seems solid, official and enduring. At the same time money is a confidence trick: an i.o.u. printed on cheap material that promises the holder nothing but more paper money. The evolving paradox of modern currency — foundational yet resting on faith.” He also states that “it’s really “a made-up thing, a shared fiction. Money is fundamentally, unalterably social.” This article made it clear to me how money itself virtually has no value, it is a concept constructed by society. If we did not believe that money had value, it simply wouldn’t. This is shown in The Island Of Stone Money by Milton Friedman.
In his article, Friedman discusses the small island called Yap, which is located in the Pacific Ocean. The study of this island and the villagers helped economists answer the question of what money really is. On this island, they had no silver or gold, only large and heavy stones which they used to exchange for things. They realized quickly that it is difficult to physically exchange these items because they were so difficult to move. These pieces of stones were as heavy as a car. So, even though the stone does not move, everyone in the village is aware who the stone belongs to. Friedman goes on to tell a story about how once, the villagers were transporting a large stone during a storm, and it ended up on the bottom of the ocean. When the villagers returned and told everyone else what had happened, they decided that the stone was still of value, even though it was no longer tangible. This relates to current day currency because even though people may not have the money physically, they can still use it to purchase items. This brings to the surface the discussion of whether or not in today’s current climate if money has any physical value.
In today’s society, people rarely even use money. Most forms of payment are through credit cards or debit cards. But, something new has been thrown into the mix, bitcoin. According to CNN, Bitcoin is a new currency that was created by Satoshi Nakamoto. It is a digital wallet, a virtual bank. People use bitcoin mainly because there is no “middle-man” meaning the bank. However, this could potentially lead to issues. An article written by Anne Renaut states that“ This “high degree of anonymity” could lead Bitcoin to become a “monetary alternative for drug dealing and money laundering,” warned the European Central Bank. Another concern stated in the article is the concern of experiencing cyber attacks.
Obviously, compared to the stones used on Yap, this is a much more advanced method. When you really think about it, it seems as if the more we use things like bitcoin and credit, the less valuable real “money” becomes. The amount of money in our bank account does not equal the amount of physical dollars that you have. It is simply a number that increases and decreases over time, and seems to rule our entire lives.
As a child, like most, I was raised with the understanding that money gets you things. Before finding out what inflation was, I remember asking my mom, “if there is not enough money for everyone, why can’t we just make more?” Questioning this has led to my understanding that money is a concept. Money exists because we believe it does. Nothing can exist if you do not believe in it. If your computer dies, it is useless. By plugging it into an outlet, you give it the power, and it becomes valuable to you. In a similar way, we give money its power. Without the belief in money, it would have no power.
After researching and analyzing the sources provided to me, my view on currency has changed and I’ve come to understand that money is a made up concept. I used to think of it as a concrete thing. However, I now know that it is an idea that someone once had, and became the mentality of society.
“The Bubble Bursts on e-Currency Bitcoin.” Yahoo! News, Yahoo!, https://sg.news.yahoo.com/bubble-bursts-e-currency-bitcoin-064913387–finance.html.
“The Invention of Money.” This American Life, 19 Feb. 2018, https://www.thisamericanlife.org/423/the-invention-of-money.
Friedman, Milton “The Island of Stone Money.” Diss. Hoover Institution, Stanford University, 1991. “What Is Bitcoin?” CNNMoney, Cable News Network, https://money.cnn.com/infographic/technology/what-is-bitcoin/index.html.